In a court filing, Olympia Sports CEO Mark Coffey said the bankruptcy was necessary for the retailer to continue paying its 324 employees while the liquidation drags on, and reimburse creditors including Nike, Crocs, Skechers, New Balance, UPS and more.
“I believe that it is imperative that Olympia be able to continue the [going out of business, or GOB] sales process post-petition,” Coffey wrote. “As noted, Olympia plans to continue liquidating its stores before proposing a plan of liquidation in this case. Continuing with the GOB sales process without interruption will offer the estates the best chance of maximizing returns to creditors.”
Olympia’s brick-and-mortar operation once expanded to more than 230 locations by 2012, but in the seven years after, that number whittled down to 152 as the company shuttered underperforming stores as their leases expired. The Maine-based retailer had a presence that extended across the northeastern U.S., including stores in New Hampshire, Vermont, New York, Massachusetts, Rhode Island and New Jersey as well as its home state.
When Southern California private equity firm CriticalPoint Capital purchased the intellectual property of Olympia Sports and 75 stores in 2019, the other 77 retail locations closed. Throughout the Covid-19 pandemic, 12 more stores were shuttered, before the decision was made to close 22 more in April and May this year. By June, just 41 stores remained before another six closed.
The company didn’t open an e-commerce site until 2018, as the store base continued thinning out. But that venture didn’t last long, as high shipping costs and increasing online competition forced Olympia to abandon digital retail in April 2022.
The company’s performance also slid its operation contracted. In 2021, Olympia’s gross revenues were approximately $74 million with an EBITDA loss of approximately $1.5 million. But through July 31, 2022, gross revenues were just $28 million with a larger EBITDA loss of $7.8 million.
CriticalPoint Capital, which also owned JackRabbit, formed the entity Running Specialty Group (RSG) after acquiring Shoes.com and Shoebuy.com from Walmart in October 2020, but the larger group of brands was short lived. RSG sold JackRabbit to Fleet Feet in December 2021 for $47.4 million, before selling the Shoes.com domain to Designer Brands, Inc. in May 2022 for an undisclosed sum. Fleet Feet sued RSG in July in a dispute over the purchase price after its new estimate put JackRabbit’s business value at $40.8 million.
For Olympia, the company now has to focus on paying back debt, especially with its parent company currently entangled in the JackRabbit suit. The debtors in the liquidation, which include Olympia, RSG Acquisitions and 11 other affiliated LLCs, have approximately 570 unsecured creditors owed approximately $28.7 million.
The total of the 30 largest, consolidated and unsecured claims is approximately $16.7 million, subject to defenses and counterclaims of and by the estates. UPS is the retailer’s largest creditor at $3.2 million, while Fleet Feet’s parent holding company J Street 1976 is Olympia’s second largest creditor at $3 million as a result of the JackRabbit acquisition. Rounding out the top five, Olympia owes $2.1 million to CRM giant Salesforce, $1.7 million to Skechers and $879,869 to e-commerce agency Born Group.
Olympia also owes $700,960 to Crocs, $627,751 to New Balance and $607,837 to Nike. Nike sued Olympia Sports in July for an alleged breach of contract for the same amount, after already cutting ties with the retailer as part of its shift away from wholesale and further into direct-to-consumer sales.
Additionally, Columbia Sportswear is still owed $495,775, while Caleres is holding out for $450,972.
Salesforce allegedly played a significant role in the events leading to the Chapter 11 filing, according to Coffey’s filing. When Olympia, Fleet Feet and Shoes.com were all under the RSG roof in April 2021, the collective entity entered into a contract for the tech titan to provide an extensive e-commerce package for the brands. RSG expected that gross sales would exceed $400 million as a result of the deployment, but that “did not come to fruition,” Coffey said.
“Unfortunately, the order management system was a brand-new product offered by Salesforce and did not work as planned,” Coffey said. “For example, orders were duplicated, not processed and sent to the wrong recipient.”
Alongside the Salesforce-related issues, Olympia had its own internal struggles largely resulting from the seasonality of its business and the residual effects of the Covid-19 pandemic.
Olympia’s earned much of its income during the holiday and back-to-school seasons, whereas the company routinely struggled throughout the spring and summer, Coffey said. While Olympia was typically able to produce enough revenue to maintain operations until the back-to-school season began in the fall, the coronavirus outbreak and related stay-at-home and shutdown orders eviscerated sales in the year prior to the Salesforce contract.
“Further, the shutdowns caused by Covid-19 aged Olympia’s inventory, meaning that much of Olympia’s inventory was undesirable and difficult to sell,” Coffey said.
As of July 5, the retail and restaurant sector held the the highest distress ratio—17.7 percent—of sectors tracked by S&P Global Ratings’ credit markets research group. In July, Altmeyer Home Stores filed for bankruptcy and is liquidating after 81 years in business. Off-price home goods retailer Tuesday Morning was speculated as a bankruptcy candidate, but was cast a $32 million lifeline by Retail Ecommerce Ventures in a deal announced just days ago.
Bed Bath & Beyond has also been under the insolvency microscope after the home and bedding retailer lost hundreds of millions in sales throughout the supply chain crisis, leading to the termination of CEO Mark Tritton. The company has since been mired in controversy, with the suicide of chief financial officer Gustavo Arnal heightening scrutiny on a class-action securities fraud lawsuit against the retailer and associated parties.